Contribution Of Remittances To Foreign Exchange Reserves At 56 Percent

May 9, 2022 | Investopaper

The contribution of remittances to Nepal’s total foreign exchange reserves has been more than 50 percent.

The average contribution of remittances during the last five period period is 56.4 percent. This indicates that Nepal’s foreign exchange reserves are heavily dependent on remittances.

After remittances, foreign loans and grants have been contributing an average of 11 percent to foreign exchange reserve. Likewise, services including tourism has been contributing 10.2 percent and export of goods about 7.1 percent in the last five years. 

Due to low exports, Nepal has to rely heavily on remittances for foreign exchange. The growth rate of remittances has averaged 7.8 percent in the last five years. On the other hand, the trade deficit has grown by an average of 18 percent during the same period.

As the growth rate of trade deficit has been much higher than the growth rate of remittances in recent years, the dependence on remittances in foreign exchange reserves is likely to decrease.

In the first eight months of the current Fiscal Year 2078/79, Nepal received Rs. 631.19 billion through remittances. Remittance decreased by 1.7 percent as compared to the same period of the previous fiscal year. In the corresponding period of the previous year, remittance inflow had increased by 8.7 percent to Rs. 642 billion. 

Likewise, the total foreign exchange reserves for the first eight months of the current fiscal year stood at Rs. 1,171 billion. 

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